Chorus of approval for NZ broadband network

The private company building New Zealand’s version of the NBN is back in vogue with investors while sentiment towards the incumbent from which it was spawned has soured.

Shares of kiwi wholesale network provider Chorus advanced by as much as 7 per cent yesterday on the ASX, their biggest one-day rise since listing, after the company reported a maiden profit and indicated it would pay a higher dividend next year than expected.

Meanwhile, Telecom New Zealand has slumped more than 10 per cent in two sessions since it delivered an $NZ281 million ($218 million) profit for 2012, after underwhelming guidance prompted brokers to take the knife to forecasts for fiscal 2013.

The contrasting fortunes of the wholesale and retail arms of New Zealand’s former fixed-line monopoly offer a glimpse of what might have been had Australia followed a different path in broadband policy.

In New Zealand, the holy grail of functional separation of the incumbent was achieved relatively painlessly when Telecom demerged its wholesale network assets into newly listed Chorus. Investors were granted five shares in Chorus for every share held in its parent.

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Telecom is now effectively a retail company, while Chorus is building most of New Zealand’s Ultra-Fast Broadband (UFB) network, which roughly equates to Australia’s NBN.

Following a competitive tender process,
Chorus
won rights to construct fibre-to-the-premises networks in 24 of the 33 biggest population centres in New Zealand. It will also deploy 3100 kilometres of fibre into remote areas, as part of the government’s Rural Broadband Initiatve (RBI), which will deliver high speed internet to far flung properties, primarily using fibre-to-the-node technology.

Opposition communications spokesman
Malcolm Turnbull
has praised the New Zealand plan as a more cost-effective model of achieving ubiquitous high-speed broadband.

“That is what Telstra should have done and what I would prefer to have had done here. Then that company would have had a commercial incentive to upgrade its network and where it needed subsidies, you could provide it," he told The Australian Financial Review.

However, it is unlikely Mr Turnbull would be able to pursue such a policy in Australia now, given Labor’s NBN is under way, and the company building it has signed contracts estimated to be worth $16 billion. Since November, Chorus has rolled fibre past 42,000 premises. This compares with 39,000 for NBN Co at the end of June. However, NBN Co expects to pass 341,000 premises with fibre by June 2013, compared with Chorus’s target of 149,000.